31 May 1996

Dairy Crest to float with share or cash option

By Shelley Wright

DAIRY Crest, the former commercial arm of the Milk Marketing Board, will be floated on the stock market this summer and 29,500 farmers will be offered the chance to retain a majority shareholding.

The flotation announcement by the Residuary Milk Marketing Board this week ends speculation that it could be split up and sold. It also coincided with the release of Dairy Crests annual results, which revealed operating profit up 21% to £34.1m on a turnover of £740m for the year to Mar 31, 1996.

The money raised from the flotation will be used to clear outstanding debts, including the £66m producer rolling fund, which was collected by the MMB in the 1993/94 milk year.

The RMMB has written to all producers who are entitled to either shares in Dairy Crest or cash. Entitlement is restricted to those who were producing milk for sale from Apr 1, 1993, to Mar 31, 1994. About 95% of these "eligible producers" are also entitled to rolling fund repayment.

Producers must complete a pre-registration form and return it to the RMMB by June 19, giving the board a provisional indication of whether they want to take their entitlement in shares or cash.

Once these details are clear the RMMB will release a prospectus in the summer, listing Dairy Crests value and the share price. Sir Derek Andrews, RMMB chairman, said his objective was to enable producers to take a majority shareholding in the company, with about 25% of the shares offered to institutional investors.

"But whether or not they take the shares is entirely up to the individual producers to decide," he added.

John Houliston, Dairy Crest chief executive, agreed that it was a matter of individual choice. "But we have always enjoyed a close relationship with producers and a substantial farmer shareholding in the company will be welcome," he said.

Mr Houliston, and Dairy Crest chairman Mike Dowdall, welcomed the end to the uncertainty over the companys future ownership. Flotation was originally scheduled for 1994, before milk industry de-regulation, but delays and adverse market conditions postponed the move.

Commenting on the annual results Mr Houliston said he was very pleased and that Dairy Crest was making encouraging progress. The firm had eliminated all borrowings and was now "robust and on the verge of a very exciting future".

Although turnover for the year fell from £747m to £740m, profits in both divisions – consumer foods and food services – improved. The drop in turnover was due to the continuing decline in doorstep milk deliveries, down 16% last year, and the full impact of the closure of the Whitland ingredients plant. &#42

John Houliston (inset) has set the wheels in motion for a summer flotation.